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Hybrid Capital Markets is a commercial mortgage brokerage and advisory firm that, in theory, secures financing in deal sizes from $300,000 to over $500 million for all product types. In this market, it hardly needs to be said that Hybrid has been playing at the lower end of that range. But the notable fact here is that it is still active.

Last year, Hybrid Capital placed about $350 million, CEO Bob Bakhchi tells GlobeSt.com. This year, he estimates, that number will probably be closer to $250 million. GlobeSt.com spoke with Bakhchi about where he thinks capital markets are headed this year in general and his pipeline specifically.

GlobeSt.com: What deals are you working on right now?

Bakhchi: We are recapping a hospitality asset in Chicago, recapping some office deals in Manhattan, financing a medical office acquisition on the Island. In fact, one of the few areas still performing well is owner occupied commercial buildings — specifically in the medical field. Those loans can secure 6% long term financing at 75% LTV. We mainly focus on the Northeast but we do sometimes do a deal on the West Coast. Right now, in fact, we are providing a $30 million bridge loan for a multifamily property in Oceanside, CA. It is for an acquisition.

GlobeSt.com: The borrower couldn’t tap the GSEs for that?

Bakhchi: No, because it is not a cash flowing asset.GlobeSt.com: What else? Are you still providing construction financing?

Bakhchi: The last construction finance transaction we closed was a small loan for a shopping center in Los Angeles in Q4 2008. Now we are only providing construction finance on a very limited basis for highly qualified sponsors. This is not so much a credit issue, though, than market dynamics. It just doesn’t make sense to build for a lot of places, especially as property valuations continue to drop. Why build at $300 per square foot, when you can buy at $250 per square foot?

GlobeSt.com: Do you think the bid ask spread is finally beginning to narrow enough to get more buildings trading?

Bakhchi: No, I don’t. It has widened in fact. In Manhattan, for instance, prices have come down but relative to historic valuations they are still very high. Also some of the ask prices are based on rents that were standard for the market a year ago but now are considered above market. Increasingly, we are seeing property valuations move further away from the true rent and market conditions.GlobeSt.com: Are there any signs that a capital markets recovery – even a small one – might be on the way?

Bakhchi: In a word, no. The lending environment has not gotten any better. Credit has not loosened up to any significant degree for commercial real estate transactions. Underwriting standards are still tightening by the week. A turnaround will not happen overnight.

GlobeSt.com: How are deals getting done?

Bakhchi: Life companies, foreign banks, a few major banks, the GSEs. For the smaller deals, the regional banks have been stepping up.

GlobeSt.com: Is it easier to finance a smaller sized deal now?

Bakhchi: Yes, for a lot of reasons. It is hard for one lender to finance the entire amount of a large or even average sized transaction in this environment. Also for larger deals, the spreads that are being charged are much higher than for smaller transactions. The conduit markets, of course, are dead. Also we are not seeing much syndications or club deals as banks are worrying about other banks.GlobeSt.com: So no signs of hope for a turnaround anytime soon.

Bakhchi: Nope. Although the Treasury plan [to buy toxic debt] could fuel optimism. One of major problems in the economy right now is lack of confidence – confidence that the market will eventually return and asset prices stabilize.

GlobeSt.com: Do you think the plan Treasury rolled out this week is going to work?

Bakhchi: It will start to take pressure off of the major money banks’ balance sheets – the Citis and the Banks of America. They will be able to clear off some of these bad assets off of the balance sheet, get fresh capital to make new and better loans. Whether that is enough to turn us around, I don’t know.

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